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Red Bull Marketing/Segementation/Pricing Essay

You are asked to address the following questions:

1. Who are the principal target segments for Red Bull and how are they positioned towards these target segments?
2. Analyse the Red Bull brand using any frameworks you judge appropriate.
3. Comment upon Red Bull’s pricing approach
4. Evaluate Red Bull’s distribution channel strategy
5. Would you describe Red Bull as a national, a European or a global brand – give reasons?
6, What marketing strategy would you recommend that Red Bull should adopt over the next 5 years?

Who are the principal target segments for Red Bull and how are they positioned towards these target segments?

Red Bull has an aggressive international marketing campaign that targets young males. These customers are often similar in their tastes for extreme sports, either as spectators or participators. Its numerous sponsored activities range from extreme sports like mountain biking, BMX, motocross, windsurfing, snowboarding, skateboarding, kayaking, wakeboarding, cliff-diving, surfing, skating, freestyle motocross, rally, Formula 1 racing, and breakdancing to art shows, music, and video games. It is this range of activities that enable the brand to be relevant to a huge collective of audiences across the globe.

These target consumers use Red Bull to replenish energy levels. The high caffeine content of the energy drink is the key influence behind the target segments for Red Bull. The ‘Anti-establishment, premium end, positioning is aimed at capturing brand loyalty from young, Generation Y males, or students aged 16+ who feel the need to re-energise. The need for caffeine is associated with being active, whether physically: nightclubbing, playing sports or mentally: working long hours, driving or studying.

Positioning

Red Bull is positioned towards two major market segments at present:

The Primary Market

Red Bull is marketed at students, via student ‘Brand Managers’ in on-campus buzz marketing promotions, at drivers in petrol stations, as a premium priced mixer in nightclubs and at gyms. Red Bull’s demographic is moving from the Generation Y population to include a more mature market demographic.

The Secondary Market

More recently, people up to the age of 44 are feeling a ‘maintained sense of time pressure’ (Mintel 2011) and are drinking Red Bull to navigate the challenges of modern living. Red Bull has aligned its marketing approach to appeal to a wider consumer base than the primary ‘Gen Y’ market segment, with alignment to more traditional, mainstream sports such as Formula One motor racing, motorcross and World Rally Championship (WRC) car racing.

Red Bull Media

The Red Bull Media House operates an online “consumer platform”. The content of the platform, TV Station, global magazine and mobile operator service is all positioned at the ‘active lifestyle’ market. The exhilarating content: documentaries, films and even music, is a key cornerstone to the brand’s positioning to its target segments. Red Bull positions itself as an aspirational lifestyle brand: athletic, challenge-driven and, to the Gen Y market, youth culture, spirited and dangerous. Red Bull media programming also pursues potential business partners who may have similar target audiences.

2. Analyse the Red Bull brand using any frameworks you judge appropriate.

Red Bull has managed to successfully position its brand as the leader in a market that did not exist before (Blue Ocean strategy – we need a value innovation curve). By establishing the brand itself as the “anti-brand” and building a strong relationship with an audience of consumers crowd that did not want to be told what to do, Red Bull has developed a relationship with its consumers by listened to this audience helping them to shape their personality and fulfill their interests (Self concept attachment)., This gave the Red Bull brand giving the brand a high level of loyalty and helped it to and leveraging its brand equity.

[Perhaps delete, covered later, here more disussion on Value Innovation] There are many reasons why Red Bull has become such a successful brand, consumed by many and known by all. Firstly, Red Bull has developed a very strong brand recognition, from its unique and memorable name, its instantly recognizable can, to the logo, which consists of bold graphics. Its slogan ‘Red Bull gives you wings’ has been reinforced with consumers by repetition, consistently making it instantly recognizable by all.

Red Bull segmented the market and positioned the brand very effectively, with its controversial and anti-establishment status. Red bull is not viewed as being just a product, it is a “Way of Life” which is associated with energy, extreme sports and danger, very appealing to its core audience.

Even though Red Bull has been followed and copied several times by similar products, due to its consistent and unique communications strategy Red Bull has managed to stay “fresh and relevant” (how?) and still maintain a leading position in a very crowded market. (how?)

Red Bull’s unique and extremely well coordinated marketing repertoire is without a doubt one of the key factors for its success. Red Bull’s strategy to target its audience with non-traditional ads, made the brand more believable for its “No brands” followers. For a brand such as Red Bull, marketing communications are deemed to be so important that 35% of its turnover goes to communications and events. Through this manner of communication, Red Bull avoids traditional media channels by making the product readily available – through this strategy, consumers are attracted to the brand, giving them a sense of freedom and choice which further adds to the credibility of the brand.

People talk, and if the topic is hot and controversial, even more. Red Bull is aware of this and heavily relies on “the word of mouth”. Since the very beginning the brand has had bad press mentioning the danger of consuming this product and the fact that Taurine (a component in Red Bull) was extracted from the genitals of bulls, giving the product “aphrodisiac” attributes (this was also posted on Red Bull’s website). The buzz this created, and the fact that the product was not easy to find, gave the Red Bull brand its original mystique that still remains today. Strategy (work in to this question)

3. Comment upon Red Bull’s pricing approach

Red Bull’s pricing approach is to set the price at a high level. The pricing given in the article ranges from €2-€6 depending on the point of purchase (either retail or in a bar/night club). Red Bull are not alone in charging a higher price for their product, the majority of producers in the energy drinks sector also charge a premium. This is shown in the in the table below where the price of energy drinks is compared to a close substitute, carbonated soft drinks:

(Mintel, 2011)

Since 2004 the consumers have paid an average premium (per litre) for energy drinks of 66.29%. They are willing to pay this premium as they perceive that energy drinks provide unique benefits (i.e. an energy boost) when compared to substitutes. “While energy/sports drinks charge a premium compared to non-functional fizzy drinks (ie Coca-Cola) this has not harmed sales, even though the majority of UK consumers do think they are expensive for what they are. Nevertheless, consumers have shown that they are prepared to pay a premium for a product which provides such a tangible benefit”.(Forsyth, 2011)

Setting the pricing at a high level also leads the consumer to make price quality inferences about Red Bull. The consumer associates the high price with a high level of quality. In doing this Red Bull are making their product a “premium product”. In defining a premium product Penny Coase refers to the use of this pricing strategy: “A premium brand will always command a higher price, often significantly more than that charged by mainstream brands within the product category. However, there are typically ‘tiers’ of price and of premium;” (Coase, 2010)

The benefit that premiumization (through pricing) provides to Red Bull is that it leads them to higher margins and away from competing through providing discounts. Whilst the price of Red Bull is high in comparison to substitutes it is still affordable as the cost makes up a small portion of an individual’s disposable income. This approach to pricing means that Red Bull falls in to the “masstige” (Silverstein & Fiske, 2003) category, where they can access the mass market whilst still retaining an image of quality: “These goods occupy a sweet spot between Mass and class. While commanding a premium over conventional products, they are priced well below super premium or old- luxury goods” (Silverstein & Fiske, 2003)

Red Bull sold 4.631 billion cans of drink in 2011 (Red Bull, 2012) which shows that even at a higher price than it’s substitutes their pricing strategy generates significant volume of sales. Following the theory that:

Profit =Price ×Volume –Costs

Red Bull will be able to generate a high level of profit as they charge a high price whilst achieving significant sales whilst producing a product at relatively low costs.

Finally Red Bull were one of the first entrants into the caffeinated energy drinks market (prior to this energy drinks were based on Glucose content) and this has allowed them to set the level of pricing that they want within the market. As the product life cycle approaches maturity and Red Bull’s competitive advantage decreases they will be able to partake in “ Price Skimming”, whereby they reduce the price of the good to a lower level and attract a new group of consumers who were more price sensitive to the original pricing:

(witiger.com)

Red Bull

Q4: Evaluate Red Bull’s distribution channel strategy

Red Bull was an ‘anti-brand’ that was targeting the young ‘in-crowd’. Young at this time meant Generation Y who had no brand loyalty and were suspicious of being ‘marketed to’. This called for a fresh distribution strategy to support the brand positioning. One of the hardest business strategies to effect is to break into a profitable industry dominated by established brands. Virgin Cola struggled to make an impact in the US when it was launched in the late 1990’s due to the stranglehold that Coke held over shelf space. However around the same time Red Bull launched using a radically different distribution strategy.

Channel Implementation

In order to both promote Red Bull as an anti-brand whilst by-passing the lock that established soft drinks manufacturers held on the distribution and retail network in most markets, the company adopted a novel two-pronged approach.

Firstly it developed a ‘street marketing strategy’ in which the “Wings Team” (generally comprising attractive female students in a customised Mini with a giant Red Bull can on the back) would distribute free samples to those thought in need of energy. This would typically be in public spaces where the young and cool hang out; this might include public squares, beaches, parks, ski resorts, or skating parks. This would be an opportunity to introduce the product, talk about its properties and convey consumer feedback.

Secondly it would target a select number of venues – generally trendy bars or nightclubs that were again deemed to be the places where the cool people hang out. Here DJs, bar tenders and other opinion leaders would be approached. Empty cans would be left on tables and even in bins outside. In the early period other venues that asked to sell Red Bull would be turned away, re-enforcing its select image and supporting the price premium that was charged.

The company moved on to establish “student brand managers” on university campuses. These would throw parties at which Red Bull would be distributed. The brand would become better known amongst the target audience and very cheap market research would be reported back at very low cost. Through this unconventional ‘youth underground’ the viral message spread.

As its popularity grew (aided by the ‘invention of the Vodka Red Bull’) it was able to dictate terms to bars that stocked its cans. This included minimum pricing to maintain exclusivity and the requirement that bar tenders fill a glass and present the customer with the rest of the can – thus creating high brand visibility in the bar.

The same energy effects that made it popular with clubbers also drew a following amongst long distance truckers. Its availability in late night gas stations and even vending machines added to its edgy image whilst channelling sales to new markets.

Outcomes

Red Bull has succeeded in breaking into the soft drinks market by effectively establishing a niche through bypassing conventional distribution channels. Its positioning as an exclusive (and elusive) product meant it was well placed to be carried on a wave of buzz marketing into the mainstream.

Red Bull has become a mass-market drink and is found across a wider range of supermarkets and licensed premises. This presented the risk that it would lose its exclusivity as the cool crowd grew up and moved on, leaving it as one of a number of similar commoditized products that would be vulnerable to price competition.

However potential brand risks such as it being banned in Denmark and France and being restricted to medical use in Japan and Norway actually ensured the edgy image endured. Hence thus far its brand strategy has enabled it to maintain the power in its relationship with sellers, and is hence able to dictate terms in a way that has supported the brand positioning so far. 5. Would you describe Red Bull as a national, a European or a global brand – give reasons?

Red Bull can be considered a global brand both in terms of its near-global customer base and its extensive marketing campaigns. Red Bull does this by carefully targeting a huge collective of niche audiences across the globe, which cumulatively comprise its total share of the energy drinks market. This managing of the brand globally allows Red Bull to achieve economies of scale, particularly for product and promotion, and give it greater communications control and consistency in how it reaches target audiences, often through a global brand message. There are, of course, exceptions and these will be addressed in the closing paragraphs.

Red Bull has an aggressive international marketing campaign that targets young males. These customers are often similar in their tastes for extreme sports, either as spectators or participators. Its numerous sponsored activities range from extreme sports like mountain biking, BMX, motocross, windsurfing, snowboarding, skateboarding, kayaking, wakeboarding, cliff-diving, surfing, skating, freestyle motocross, rally, Formula 1 racing, and breakdancing to art shows, music, and video games. It is this range of activities that enable the brand to be relevant to a huge collective of audiences across the globe.

At the end of 2011, Red Bull reported employment of 8,294 people in 164 countries. In the same year, Red Bull achieved worldwide sales of 4.631 billion cans. This scale has been achieved through its positioning as a global brand, notably on the basis of product and promotion. With few exceptions the company manages a highly focused brand effort.

On a product level, the company maintains the ‘Red Bull’ brand name and ensures consistent product ingredients across its markets. Its beverage brand extensions are also consistent i.e. ‘Red Bull Sugarfree’ or ‘Red Bull Energy Shot’. This is further reinforced by universally recognised packaging and company merchandising, which are also consistent.

On a promotional level, the company deploys steady messaging that is always on-brand in terms of look and feel. The bold contrast of its red lettering against a navy and silver background is recognisable across the globe. Its advertising slogan, ‘Red Bull gives you wings’, is also adopted as is in most markets without the usual translation pitfalls. The exception to this is in Malaysia, where the company instead deploys a single one-word slogan, Bullleh!, a word play on the Malay word Boleh (lit: Can be done) and the word Bull. Furthermore, Red Bull is sold world over in a tall and slim blue-silver can, except in Thailand where it is sold in a wider gold can with the name of Krating Daeng.

It is these examples of exception to Global promotion, that highlight the entry challenges to more challenging markets. A key example is China, where Red Bull may need to revise its global marketing strategy to break into this valuable market where there are significant differences in consumer culture, needs and usage patterns. As the previous example of Thailand illustrated, Red Bull may need to diversify its marketing strategy and seek alternative ways of reaching Chinese youth culture.

This experience tallies with many Western brands who have tried unsuccessfully to break into Asian markets, particularly China. The challenge Red Bull must face in trying to enter China is whether to adapt or to continue to standardise its marketing strategy to date. And, if it choses to adapt its strategy, would this in turn impact its brand positioning in its domestic market? (A recent example of this is Google’s decision to temporarily suspend its worldwide operating values as it currently does in China.)

Furthermore, despite the company’s employees being based across 161 countries, most of its major decisions are still made either at Red Bull’s headquarters in Fuschl, an Austrian village, or at Hangar-7, a few minutes outside Salzburg. This is true even of decisions relating to Red Bull Media House, its brand extension media company. This corporate structure could work to hamper local, or glocal marketing agility. However, as Apple has demonstrated in recent years, it is possible for a company to export its vision of the world to far flung markets across the world.

6. – What Marketing strategy would you recommend that Red Bull should adopt over the next five years? :

In researching this paper, many sources expressed concern that Red Bull may already be reaching its greatest success in a maturing engergy drinks market. However, research indicates the opposite. The energy drinks market is expected to grow organically by 33% until the year 2015 (Datamonitor, 2011). So, a more important challenge for Red Bull over the next five years is how it might grow its share of this market. Our research leads us to conclude that Red Bull has already begun positioning itself favourably in order to capitalise on a growing market opportunity in two ways. Firstly, its should continue to its successful founding practice of aggregating niche markets globally.

The popularity and growing range of exptreme sports will continue to form a core part of Red Bulls’ progressive audience, which in turn helps convert into a broad customer base. Secondly, Red Bull is at the forefront of marketing practices that are overhaulling existing models of demand generation. In the case of Red Bull, the company is doing this via its recently launched Red Bull Media House. Above all, Red Bull Media House enables it to tap into its audiences increased media consumption at a global scale. This is a shrewd move by Red Bull as it also enables it to create further advertising and partnership revenues as a secondary source of profit.

The move into media communications could help Red Bull deepen its penetration in hard to convert markets, such as Asia. From a brand perspective this is clearly desirable as it reduces the requirement to create alternative brands. Moreover, by controling media messaging it may also extend its reach to other chosen demographics. These two features of Red Bull’s marketing strategy should enable it to capture this growth in the Energy drinks sector. However, as the success of Red Bull Media House reveals, there are more radical ways in which Red Bull might pursue its next five years.

Product

Possibly the most radical area Red Bull could chose to innovate in would be a subtle but significant brand extention to its core product Red Bull energy drink. It could tap into another adjucent category, health drinks, by focussing its attension on additional healthy ingredients like guarana and vitamins. This brand extension, Red Bull Health, would extent its extreme sports image into one that is moreover health conscious. Further products like branded energy bars, decaffinated Red Bull for kids, and Red Bull water would fit into this new market extension. A subtle repositioning such as
this would also enable Red Bull to consider entering the fitness services market, such as gyms. A Red Bull gym would deliver a wider customer base, while enabling it to be creative with the range of supported activities.

Promotion

Red Bull Media House is the communications platform that will enable its customers to be always on in communicating with the brand. If a wider market share strategy is adopted, via gyms for instance, Red Bull might do well to consider a new slogan for its brand. As challenging as this may be, brands like Coke have shown that this is possible and even necessary to stay relevant in changing times. Here, Red Bull might chose to review its ‘give you wings’ slogan by finding a tag that positions it as an active lifestyle brand.

Place

By capturing more mainstream market share through Red Bull gyms and its Media House, Red Bull may reach markets previously difficult to open, such as China. It could opt to launch Red Bull gyms first, thereby positioning it firmly as a lifestyle brand. A launch of its health drink variants could follow. Distribution of Red Bull could also be deepened by use of vending machines in places complemenatry to active lifestyles.

Price

As the market continues to grow, Red Bull can continue to maintain its price premium. In conclusion, the evolution of Red Bull as brand will most certainly come from brand extensions which are based upon broader product offerings. As the success of Red Bull to date indicates, its forward-thinking marketing has created an enormously valuable brand that is very likely set to continue its global success. There is no doubt that Red Bull created a new market, but with so many competitors using the same marketing approach and targeting the same consumers, there is a strong possibility for endless generic similar products to flood the market and effectively question the authority of Red Bull.

Constant change in the market, consumers behavior and high volume of direct competitors continuously launching new products poses a significant risk to Red Bull. A primary threat is those with marketing strategies which establish the brand as being ‘small, unique and rebellious’. Even though these brands are positioning themselves very well, capturing the attention of the “anti-brand” crowd, Red Bull remains the leader in this market.

We believe that Red bull should be bold and confident and aim for a bigger marketing strategy, while still adopting a NON-traditional approach,(guerilla campaigns, experiential, etc). Red Bull cannot deny its size, it should embrace its position by leveraging its brand equity. It is possible to apply a mass marketing approach. without alienating consumers. For example, Virgin a big company doing mass communication has managed to build a mass marketing campaign without losing its individualist spirit, brand vision and rebellious soul.

By adopting a mass marketing strategy, Red Bull may lose some of its original consumers however, it will gain a new set which appeal to a broader audience. If Red Bull does not advance its marketing campaign in the face of increased competition, other brands are likely to gain market share, if they bring something new to the table (e.g. new trends or more relevant image), and Red Bull faces the potential risk of appearing ‘dated’. Red Bull should be loyal to its original attitude and proposition, but be bold, in the face of a changing business context by going big, even bigger than the actual hangar!


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